The Billing/Accounts Receivable/Cash Receipts Process:
This chapter explores in detail the B/AR/CR process. We will examine managerial decision making perspectives concerning this process; technologies available to support this process; and various models of this process (DFD's, ERD's, and system flowcharts). Finally the chapter will explore The Control Matrix for this process.
The billing/accounts receivable/ cash receipts (B/AR/CR) process completes the order-to-cash process by accomplishing the following activities:
1. billing customers,
2. managing customer accounts, and
3. securing payment for goods sold or services rendered.
The billing/accounts receivable/ cash receipts (B/AR/CR) process is an interacting structure of people, equipment, methods, and controls designed to create information flows and records that accomplish the following:
Support the repetitive work routines of the credit department, the cashier, and the accounts receivable department.
Support the problem-solving processes of financial managers.
Assist in the preparation of internal and external reports.
First, the B/AR/CR process supports the repetitive work routines of the departments listed by capturing, recording, and communicating data resulting from the tasks of billing customers, managing customers accounts, and collecting amounts due from customers. Next, the B/AR/CR process supports the problem-solving processes involved in managing the controller and treasury functions. Finally, the B/AR/CR process assists in the preparation of internal and external reports, including GAAP-based financial statements.
The B/AR/CR process occupies a position of critical importance to an orgainization. For example, in order to keep receivables at a minimum, the billing process must be rapid, the accounts receivables must be closely monitored and collections must be converted into working resources in a timely manner. Keeping receivables at a minium should be a major objective of a B/AR/CR process. While we tend to associate the B/AR/CR process with mundance recordkeeping activities, the process also can be used to improve customer relations and competitive advantage.
Billing/Accounts Receivable/Cash Receipts Process Activities:
Bill Customers: In the billing function, the goal is to get invoices to customers as quickly as possible; with the hope of reducing the time it then takes to obtain customer payments. This is done by first comparing the sales order notification with the Shipping's billing notification. Next, an invoice is prepared and sent onto the customer.
Manage Customer Accounts: Managing customer accounts involves an array of activities that typically occur between customer billing and later cash collection. This includes (1) sending periodic statements of account to customers, (2) accounting for sales returns and allowances or other accounts reveivable adjustments, and (3) accounting for bad debts.
Secure Payments from customers for goods or services
Billing/Accounts Receivable/Cash Receipts Information Flows:
Horizontal Information Flows:
Horizontal Information Flows show typical information flows handled by the B/AR/CR process. the flows provide an important communications medium among and between departments and entities in their relevant environment.
Shipping department informs the accounts receivable department (billing section) of shipment.
Accounts receivable department (billing) sends invoice to customer.
Accounts receivable department (billing) informs general ledger process that invoice was sent to customer.
Customer, by defaulting on amount due, informs credit department on nonpayment.
Credit department recommends write-off of the receivable and informs accounts receivable department.
Credit department, by changing credit limits, informs sales order department to terminate credit sales to customer.
Accounts receivable department informs general ledger process of write-off.
Customer makes payment on account.
Cashier informs accounts receivable department (cash applications section) of payment.
Cashier informs general ledger process of payment.
Vertical Information Flows, explain: The flow of information between the operations processes and higher levels of management. The information flows "upward" in the heiarchy. The information at the management level is used for strategic decision making.
Customer self-service systems are currently prevalent in many sectors, primarily through the use of automated telephone systems where the customer selects options and enters account information via the number keys on the telephone. Banks were the first to implement such systems with ATM's. ATM;s allow customers to withdraw cash, make deposits, transfer funds between accounts and so forth without a teller.
A more recent trend - Internet systems that provide access to customer information. ~Preferred by customers over using the phone.
Internet-based systems also bring greater capability to systems:
Most of the courier companies now allow users to connect through the Internet and identify where their package for delivery is currently located and if delivered who signed for the receipt of the package.
In some cases, customers can check their orders as they progress through the manufacturing process or even check inventory availability before placing orders.This funtion is implemented within UCF. If students need to file a petition for classes, the status and location of the invoice is tracked and the student can log on through the internet to see the staus of their petition to save them from having to come to the school to consistently check on its status.
Some of the more advance systems also allow customers to check production planning for future manufacturing to determine if goods will be available when they are needed.
The payback on such systems is huge when consideration is given to the reduced number of people that are needed to staff customer call centers - particularly beneficial because of the high turnover such centers incur due to the high boredom factor associated with the job.
Digital Image Processing
A large quantity of paper documents make up the B/AR/CR process, so the ability to quickly scan, store, add information to, and retreive documents on an as-needed basis significantly reduces:
labor costs for filing
physical storage space and structures necessary for storing paper-based files.
An equally large quantity of digital image documents are organized and filed:
Electronic folders are created to store and organize related documents.
The folders are retreivable via their electronic tabs.
The digital image processing system can make an electronic image instantly available anywhere in the world where a connection to the system can be established.
Likewise, if a customer contacts a customer service representative, the representative can quickly retreive the digital images of customer-related documents by computer and provide the customer a timely response-avoiding wasted time retrieving paper documents and returning calls to the customer.
Cash Receipts Management
Sound cash management - free up funds so that they can either be invested to earn interest or used to reduce debt, thus saving interest charges.
Overall management objective - to shorten, as much as possible, the time from the beginning of the selling process to the ultimate collection of funds.
In the billing function, the goal is to get invoices to customers as quickly as possible, reducing the time it then takes to obtain customer payments.
Automaticallyproduced invoices - ensures that invoices are sent to customers shortly after the goods have been shipped.
Potential delays in collecting/depositing customer cash receipts
and having those receipts clear the banking system:
Float - is the time between the customer tendering payment and the availability of good funds.
Good Funds are funds on deposit and available for use.
Float is a real cost to a firm - measured by the firm's marginal borrowing rate.
The following procedures are designed to reduce or eliminate the float associated with cash receipts:
Magnetic ink character recognition (MICR) - expedites the processing of checks through the banking channels.
Charge card - a method of payment whereby a third party, for a fee, removes from the collector the risk of noncollection of the account receivable.
Debit card is a form of payment authorizing the collector to transfer funds electronically from the payer's to the collector's balance. Many retailers find direct deposit attractive because it represents the elimination of float.
There are four other solutions that organizations have used to shorten float, improve Internet business practices, or achieve other economies:
Automated Clearing House (ACH) - Electronic Funds Transfer (EFT) - conceptually, the essence of the ACH system is not dissimilar to that of the debit card. Through a prearranged agreement between the trading parties, the collector's bank account is credited and the payer's account is debited for the amount of the payment. This might happen at specified recurring intervals (direct deposit), or it might be initiated by the payer - a so-called customer-initiated payment (CIP) - via a touch-tone or operator-assisted phone call or through a personal computer. www.nacha.org
Lockbox - ia a postal address, maintained by the firm's bank, which is used solely for the purpose of collecting checks. The bank constantly processes the lockbox receipts, providing a quick update to the firm's bank balance. The lockbox bank traditionally sends the company the remittance advices (RAs), photocopies of the checks, and a listing of the remittances, prepared by scanning the MICR-encoded RAs. Many banks now offer an electornic lockbox service.
Electronic Check - closely resembles a paper check with the inclusion of the customer's name, the seller's name, the customer's financial institution, the check amount, and a digital signature. Public-key cryptography is used to protect the customer's account from illicit activity.
Electronic Cash - a financial institution issues an individual cash that is placed into an electronic wallet. The cash is issued in an electronic form match the way it would be in paper form. The individual spends out of the electornic wallet by transferring the electronic cash as payment. However, unlike using a check, the individual making the cash transfer is generally not traceable.
The Fraud Connection -
Segregation of Duties occurred between the functions of handling cash (custody of resources) and recording cash transactions. Link to a website discussing segration of duties and its importance. this concept relates to one person conducting multiple duties within the business function illiminating the check and balance needed. For example, an emplyee both writting and cashing checks and rcording transactions in the general ledger. This can create a major problem if this person is engaging in fraudulent behavior because no one would even know because the duties that may raise suspicion are all conducted by that person.
Lapping - a common scheme for misappropriating cash by mishandling customer accounts. Ex: the bookkeeper pockets cash to the bank nor records it as received from customer A. In order to avaid complaints from customer A, Customer B's cash receipt is recorded as from customer A.
Ex. Wanda is the bookkeeper for Honest Harry's House of Horiculture (4Hs). She also handles cash for the company. Wanda pockets cash received on account from customer A. She neither deposits the cash to 4Hs bank account nor records it as received from A. So that customer A will not complain that the cash payment was never credited, Wanda deposits cash that is later received from customer B but credits A's account for the paymeny. So that customer B will not complain, Wanda deposits cash that is later received from customer C but credits B's account for the paymert. And on it goes.
Electronic Bill Presentment and Payment (EBPP) Systems - internet-based systems for sending bills/invoices to customers and receiving the customer payment electronically. 2 types:
Biller-direct Method- a company posts bills to its own website & sends an email notification to its customer that their bill has been posted.This sytem is employed by cingular wireless. The link for their website is www.cingularewireless.com
Consolidation/Aggregation Method - bills are not posted to the billing co.'s website, but a site such as www.checkfree.com that posts bills from a number of companies.
Invoice- a business document used to notify the customer of an obligation to pay the seller for the merchandise (or service) ordered and shipped (or provided, if a service).
Remittance advice - a business document used by the payer to notify the payee of the items being paid. This may take te form of a copy of the invoice or a stub attached to the
Accounts receivable master data- a repository of all unpaid invoices issued by an organization and awaiting final disposition. As the invoice is created, a record of the receivable is entered into the master data. Subsequently, the records are updated - ex. the receiveable balance is reduced - at the time that the customer makes the payment. Two types:
*
## Balance-only system - accounts receivable records consist of a customer's current balance due, past-due balance, and finance charges/payments related to the account.
Open-item system - more complex system, useful when the customer makes payments for specific invoices rather than periodic payments.
Accounts receivable adjustments data - created as sales returns, bad debt write-offs, estimated doubtful accounts, etc... are processed.
Cash Receipts Data - created when customer payments are recorded, contains details of each payment as reflected on the R.A. accoumpanying a payment.
Remittance Advice File - stores copies of the remittance advices themselves.
Narratives of the OE/S Process:
Write narratives for each of the models provided in Chapter 11 starting with:
B/AR/CR Process Context Diagram:
OE/S process sends a sales order notification as well as a shipping's billing notification to the B/AR/CR department.
An invoice and credit memo are sent to the customer after each sale.
Statements are sent to the customer in order to remind the customer of the amount due.
The customer sends in their payment (check) along with the remittance advice which references the order.
A deposit slip is created daily and sent to the bank along with the endorsed checks.
In the event of a sales return, the receiving department sends a sales return notification to the B/AR/CR department in order to update the customer's balance due.
Throughout the process, the general ledger is continually updated for invoices, estimated bad debts, write-offs, sales returns, and cash receipts.
B/AR/CR Process Level-0 Diagram: - The sales order notification and the shipping's billing notification must both exist before the billing process can begin.
- The perform billing process retrieves data from the customer master data and updates the sales event data.
- An invoice is sent to the customer and the accounts receivable master data is updated. In addition, the general ledger is updated to show a sale and accounts receivable balance.
- Accounts receivable data is sent to the manage customer accounts process.
- The manage customer accounts process sends out periodic statements based on the accounts receivable master data.
- If items are returned, the manage customer accounts process gives the customer a credit memo and updates the accounts receivable master data. Data is also needed from the accounts receivable master data to validate the return. The general ledger is also updated to reflect the returned merchandise.
- Long-standing accounts receivable items are retrieved from the A/R master data and the manage customer accounts process determines the estimated bad debts and write-off, which are sent to the G/L process. This data is also recorded in the AR adjustments event data and the A/R master data is updated to show a credit to accounts receivable.
- A/R master data is also sent to the receive payment process. When the customer sends in a payment, a deposit slip is generated, the cash receipts event data is updated, the A/R master data is updated, the G/L process is updated, and a remittance advice is filed.
B/AR/CR Process Level-1 (process 1) Diagram:
The sales order notifications and shipping's billing notifications are compared for billing purposes.
Descrepancies are rejected.
Validated shipping notifications are prepared into invoices.
Information from the customer master data is used to address and send the invoices to the customer.
Accounts receivable master data table is updated to reflect the amount of the sale.
Sales event data table is updated.
Invoice is sent to the customer and the general ledger is updated.
Types of Billing Systems:
In general, two kinds of billing systems exist:
Post-billing system - invoices are prepared after goods have been shipped and the sales order notification has been matched to shipping's billing notification. This link provides an example of a post-billing system, http://www.dmbi.com/postbill.htm.
Prepost-billing system - invoices are prepared immediatley on acceptance of a customer order, after inventory and credit checks have been accomplished. Pre-billing systems often occur in situations where there is little or no delay betwen receipt of the customer's order and its shipment. For this type of system to operate effeciently, the inventory control system must be very reliable. If an order is accepted and an item then turns out to be unavailable, all accounting entries would have to be reversed.
B/AR/CR Process Level-1 (process 2) Diagram:
Processes 2.1 through 2.3 relate to sales return adjustments while processes 2.4 and 2.5 occur at specific intervals. The receipt of sales return notification begins this process. Sales returns are verified to be valid, using accounts receivable data. Any invalid returns are rejected. Once validated, a credit memo is created and the accounts receivable master data is updated to reflect the return. At the same time, a journal voucher is prepared to be sent to the general ledger process reflecting the return. The accounts receivable adjustment event data is updated. Periodically (on a monthly basis), customer statements are prepared using the accounts receivable master data. The statements inform the customer of the unpaid invoices that are now due. In addition to preparing customer statements, one of two types of write-offs occur for customer accounts. The two types are a recurring adjusted entry for estimated bad debts or a periodic write-off of actual worthless accounts. In either case, the adjustments are recorded in the event data, updated to the customer balances in the accounts receivable master data, and summarized and posted to the general ledger process.
B/AR/CR Process Level-1 (process 3) Diagram:
This diagram shows the process of receiving payment. It begins with the receipt of check and remittance advise which are compared-- any anomalies are rejected. The compared documents are then validated and endorsed. The AR Clerk then prepares the deposit slip based on the endorsed check which is forwarded to the bank. The CR event data store and the General Ledger are both updated. The AR Clerk takes the remittance advice and records the customer payment in the computer which updates the Remittance Advise File and the AR Master Data.
B/AR/CR System Flowchart (Billing Function):
The Billing Clerk manually keys the requested shipments to be billed. The computer prepares and displays for the Billing Clerk a list of "Shipments not yet billed". The Billing Clerk then enters selected shipments and prepares a batch total for use later. The Billing Clerk then selects the shipments and executes the billing program. The computer creates and prints the invoice, updates the AR and General Ledger data (which updates the Enterprise Database), sends "Billing Completed" notice with the amounts posted to AR and related accounts and displays it for the Billing Clerk. The printed invoices are then sent to the Customer for payment. The Billing Clerk used the previously created batch totals and compares them with display of changes to AR and related balances.
B/AR/CR System Flowchart (Cash Receipt Function):
The customer sends checks and remittance advices. They are received by the mailroom clerk. The mailroom clerk endorses the checks and fills in the amount and prepares a batch total. The mailroom clerk then scan the cash receipt data and captures the customer account by the use of optical character recognition. The computer system automatically edits the data, computes batch total, updates the database, and prepares reports. The system also prepares two copies of deposit slips, which are sent to the cashier. The system then displays the entered data on the mailroom clerks monitor. The clerk then reconciles the batch total (error not shown). The mailroom clerk then forwards the remittance advices to accounts receivable and forwards the checks to the cashier. The cashier then compares the checks to the two deposit slips (error routine not shown). When done comparing, one copy of the deposit slip and the checks are sent to the bank for deposit and the second copy of the deposit slip are filed numerically.
ERD model:
The data structure contained within the ER Diagram for Billing/Accounts Receivable/Cash Receipts process include Inventory and Banks as the resources, sales orders, stock pick, shipments, sales invoices, cash receipts and deposits as the events, and customers and employees as the agents. The Inventory consists of the goods for which payment is required and the banks represent an external entity into which the cash receipts are deposited. Each resource usually has some type of document associated with it. For example an invoice would be remitted with the cash receipt and the cash receipt would be recorded and credited to the customer, requiring some sort of documentation. The employee agent is an internal agent while the customer is an external agent in this very simple ERD depicted in chapter 11.
Micah's Quick horizontal guide. (this is extremly abreviated. do not rely only on this for studying.)
1. ship tells A/R when shipped
2. A/R sends invoice
3. A/R tells GL about invoice
4. Customer non pay to credit
5. credit tells A/R to write off
6. credit tells sales to stop customer
7. credit tells GL of write off
8. Customer pays cashier
9. cashier tells A/R of pay
10. Cashier tells GL of pay
The Billing/Accounts Receivable/Cash Receipts Process:
This chapter explores in detail the B/AR/CR process. We will examine managerial decision making perspectives concerning this process; technologies available to support this process; and various models of this process (DFD's, ERD's, and system flowcharts). Finally the chapter will explore The Control Matrix for this process.
The billing/accounts receivable/ cash receipts (B/AR/CR) process completes the order-to-cash process by accomplishing the following activities:
1. billing customers,
2. managing customer accounts, and
3. securing payment for goods sold or services rendered.
The billing/accounts receivable/ cash receipts (B/AR/CR) process is an interacting structure of people, equipment, methods, and controls designed to create information flows and records that accomplish the following:
First, the B/AR/CR process supports the repetitive work routines of the departments listed by capturing, recording, and communicating data resulting from the tasks of billing customers, managing customers accounts, and collecting amounts due from customers. Next, the B/AR/CR process supports the problem-solving processes involved in managing the controller and treasury functions. Finally, the B/AR/CR process assists in the preparation of internal and external reports, including GAAP-based financial statements.
The B/AR/CR process occupies a position of critical importance to an orgainization. For example, in order to keep receivables at a minimum, the billing process must be rapid, the accounts receivables must be closely monitored and collections must be converted into working resources in a timely manner. Keeping receivables at a minium should be a major objective of a B/AR/CR process. While we tend to associate the B/AR/CR process with mundance recordkeeping activities, the process also can be used to improve customer relations and competitive advantage.
Billing/Accounts Receivable/Cash Receipts Process Activities:
Billing/Accounts Receivable/Cash Receipts Information Flows:
Horizontal Information Flows:
Horizontal Information Flows show typical information flows handled by the B/AR/CR process. the flows provide an important communications medium among and between departments and entities in their relevant environment.
Vertical Information Flows, explain: The flow of information between the operations processes and higher levels of management. The information flows "upward" in the heiarchy. The information at the management level is used for strategic decision making.
Technologies Supporting OE/S Process:
There are four other solutions that organizations have used to shorten float, improve Internet business practices, or achieve other economies:
- Automated Clearing House (ACH) - Electronic Funds Transfer (EFT) - conceptually, the essence of the ACH system is not dissimilar to that of the debit card. Through a prearranged agreement between the trading parties, the collector's bank account is credited and the payer's account is debited for the amount of the payment. This might happen at specified recurring intervals (direct deposit), or it might be initiated by the payer - a so-called customer-initiated payment (CIP) - via a touch-tone or operator-assisted phone call or through a personal computer. www.nacha.org
- Lockbox - ia a postal address, maintained by the firm's bank, which is used solely for the purpose of collecting checks. The bank constantly processes the lockbox receipts, providing a quick update to the firm's bank balance. The lockbox bank traditionally sends the company the remittance advices (RAs), photocopies of the checks, and a listing of the remittances, prepared by scanning the MICR-encoded RAs. Many banks now offer an electornic lockbox service.
- Electronic Check - closely resembles a paper check with the inclusion of the customer's name, the seller's name, the customer's financial institution, the check amount, and a digital signature. Public-key cryptography is used to protect the customer's account from illicit activity.
- Electronic Cash - a financial institution issues an individual cash that is placed into an electronic wallet. The cash is issued in an electronic form match the way it would be in paper form. The individual spends out of the electornic wallet by transferring the electronic cash as payment. However, unlike using a check, the individual making the cash transfer is generally not traceable.
The Fraud Connection -- Segregation of Duties occurred between the functions of handling cash (custody of resources) and recording cash transactions. Link to a website discussing segration of duties and its importance. this concept relates to one person conducting multiple duties within the business function illiminating the check and balance needed. For example, an emplyee both writting and cashing checks and rcording transactions in the general ledger. This can create a major problem if this person is engaging in fraudulent behavior because no one would even know because the duties that may raise suspicion are all conducted by that person.
- Lapping - a common scheme for misappropriating cash by mishandling customer accounts. Ex: the bookkeeper pockets cash to the bank nor records it as received from customer A. In order to avaid complaints from customer A, Customer B's cash receipt is recorded as from customer A.
- Ex. Wanda is the bookkeeper for Honest Harry's House of Horiculture (4Hs). She also handles cash for the company. Wanda pockets cash received on account from customer A. She neither deposits the cash to 4Hs bank account nor records it as received from A. So that customer A will not complain that the cash payment was never credited, Wanda deposits cash that is later received from customer B but credits A's account for the paymeny. So that customer B will not complain, Wanda deposits cash that is later received from customer C but credits B's account for the paymert. And on it goes.
- Electronic Bill Presentment and Payment (EBPP) Systems - internet-based systems for sending bills/invoices to customers and receiving the customer payment electronically. 2 types:
- Biller-direct Method- a company posts bills to its own website & sends an email notification to its customer that their bill has been posted.This sytem is employed by cingular wireless. The link for their website is www.cingularewireless.com
- Consolidation/Aggregation Method - bills are not posted to the billing co.'s website, but a site such as www.checkfree.com that posts bills from a number of companies.
- Invoice- a business document used to notify the customer of an obligation to pay the seller for the merchandise (or service) ordered and shipped (or provided, if a service).
- Remittance advice - a business document used by the payer to notify the payee of the items being paid. This may take te form of a copy of the invoice or a stub attached to the
- Accounts receivable master data- a repository of all unpaid invoices issued by an organization and awaiting final disposition. As the invoice is created, a record of the receivable is entered into the master data. Subsequently, the records are updated - ex. the receiveable balance is reduced - at the time that the customer makes the payment. Two types:
*## Balance-only system - accounts receivable records consist of a customer's current balance due, past-due balance, and finance charges/payments related to the account.
Narratives of the OE/S Process:
B/AR/CR Process Context Diagram:
B/AR/CR Process Level-0 Diagram:
- The sales order notification and the shipping's billing notification must both exist before the billing process can begin.
- The perform billing process retrieves data from the customer master data and updates the sales event data.
- An invoice is sent to the customer and the accounts receivable master data is updated. In addition, the general ledger is updated to show a sale and accounts receivable balance.
- Accounts receivable data is sent to the manage customer accounts process.
- The manage customer accounts process sends out periodic statements based on the accounts receivable master data.
- If items are returned, the manage customer accounts process gives the customer a credit memo and updates the accounts receivable master data. Data is also needed from the accounts receivable master data to validate the return. The general ledger is also updated to reflect the returned merchandise.
- Long-standing accounts receivable items are retrieved from the A/R master data and the manage customer accounts process determines the estimated bad debts and write-off, which are sent to the G/L process. This data is also recorded in the AR adjustments event data and the A/R master data is updated to show a credit to accounts receivable.
- A/R master data is also sent to the receive payment process. When the customer sends in a payment, a deposit slip is generated, the cash receipts event data is updated, the A/R master data is updated, the G/L process is updated, and a remittance advice is filed.
B/AR/CR Process Level-1 (process 1) Diagram:
Types of Billing Systems:
In general, two kinds of billing systems exist:
B/AR/CR Process Level-1 (process 2) Diagram:
Processes 2.1 through 2.3 relate to sales return adjustments while processes 2.4 and 2.5 occur at specific intervals. The receipt of sales return notification begins this process. Sales returns are verified to be valid, using accounts receivable data. Any invalid returns are rejected. Once validated, a credit memo is created and the accounts receivable master data is updated to reflect the return. At the same time, a journal voucher is prepared to be sent to the general ledger process reflecting the return. The accounts receivable adjustment event data is updated. Periodically (on a monthly basis), customer statements are prepared using the accounts receivable master data. The statements inform the customer of the unpaid invoices that are now due. In addition to preparing customer statements, one of two types of write-offs occur for customer accounts. The two types are a recurring adjusted entry for estimated bad debts or a periodic write-off of actual worthless accounts. In either case, the adjustments are recorded in the event data, updated to the customer balances in the accounts receivable master data, and summarized and posted to the general ledger process.
B/AR/CR Process Level-1 (process 3) Diagram:
This diagram shows the process of receiving payment. It begins with the receipt of check and remittance advise which are compared-- any anomalies are rejected. The compared documents are then validated and endorsed. The AR Clerk then prepares the deposit slip based on the endorsed check which is forwarded to the bank. The CR event data store and the General Ledger are both updated. The AR Clerk takes the remittance advice and records the customer payment in the computer which updates the Remittance Advise File and the AR Master Data.
B/AR/CR System Flowchart (Billing Function):
The Billing Clerk manually keys the requested shipments to be billed. The computer prepares and displays for the Billing Clerk a list of "Shipments not yet billed". The Billing Clerk then enters selected shipments and prepares a batch total for use later. The Billing Clerk then selects the shipments and executes the billing program. The computer creates and prints the invoice, updates the AR and General Ledger data (which updates the Enterprise Database), sends "Billing Completed" notice with the amounts posted to AR and related accounts and displays it for the Billing Clerk. The printed invoices are then sent to the Customer for payment. The Billing Clerk used the previously created batch totals and compares them with display of changes to AR and related balances.
B/AR/CR System Flowchart (Cash Receipt Function):
The customer sends checks and remittance advices. They are received by the mailroom clerk. The mailroom clerk endorses the checks and fills in the amount and prepares a batch total. The mailroom clerk then scan the cash receipt data and captures the customer account by the use of optical character recognition. The computer system automatically edits the data, computes batch total, updates the database, and prepares reports. The system also prepares two copies of deposit slips, which are sent to the cashier. The system then displays the entered data on the mailroom clerks monitor. The clerk then reconciles the batch total (error not shown). The mailroom clerk then forwards the remittance advices to accounts receivable and forwards the checks to the cashier. The cashier then compares the checks to the two deposit slips (error routine not shown). When done comparing, one copy of the deposit slip and the checks are sent to the bank for deposit and the second copy of the deposit slip are filed numerically.
ERD model:
The data structure contained within the ER Diagram for Billing/Accounts Receivable/Cash Receipts process include Inventory and Banks as the resources, sales orders, stock pick, shipments, sales invoices, cash receipts and deposits as the events, and customers and employees as the agents. The Inventory consists of the goods for which payment is required and the banks represent an external entity into which the cash receipts are deposited. Each resource usually has some type of document associated with it. For example an invoice would be remitted with the cash receipt and the cash receipt would be recorded and credited to the customer, requiring some sort of documentation. The employee agent is an internal agent while the customer is an external agent in this very simple ERD depicted in chapter 11.
Micah's Quick horizontal guide. (this is extremly abreviated. do not rely only on this for studying.)
1. ship tells A/R when shipped
2. A/R sends invoice
3. A/R tells GL about invoice
4. Customer non pay to credit
5. credit tells A/R to write off
6. credit tells sales to stop customer
7. credit tells GL of write off
8. Customer pays cashier
9. cashier tells A/R of pay
10. Cashier tells GL of pay